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Investment Approach

The Investment Manager maintains a list of companies that it considers might be potential investment opportunities. This list is continually refreshed based on events, earnings trends and movements in share prices. The Investment Manager typically has several potential target companies under review at any one time in various stages of analysis.

When the Investment Manager decides to recommend an appropriate target company, the Investment Manager will propose the investment to the Investment Partnership for approval by the limited partners. The choice of target company will be subject to a vote in the affirmative of the majority in interest of the limited partners of the Investment Partnership, in effect giving the Board a veto on such a decision since the Company owns, and is currently expected to continue to own, more than 50 per cent. of the interests in the Investment Partnership.

The Investment Manager’s recommendation to the Investment Partnership will be based on a combination of public information and its own research and analysis. The recommendation will include an assessment of the attractiveness and growth potential of any potential target company’s markets, market position and the degree to which operating effectiveness and capital efficiency is below that which the Investment Manager believes to be reasonably achievable.

The recommendation will also be based on a proposed turnaround approach which would address opportunities to increase the amount and predictability of profits, improve returns on capital and reallocate resources. The analysis would also address other issues, such as re-rating potential, as appropriate.

The recommendation will include a maximum average target price up to which shares would be acquired and an estimated future share price and corresponding total return assuming successful implementation of the turnaround is reflected in the target company’s share price. Projections of future value presented to the Investment Partnership will typically be based on the assumption that the target company will remain publicly quoted.

When it is appropriate to realise the investment in the target company, the Managing Partner will cause the Investment Partnership to distribute substantially all of its assets to its partners, including the Company. The Company intends promptly to return this capital to shareholders.

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